Can we afford to buy a small apartment?

T

TheBeach

Registered User
Messages
18
Hello Everyone. Any advice at all will be welcome.

PERSONAL:
Age: 45
Spouse Age: 47

EMPLOYMENT:
Annual Gross (me): 29K
Annual Gross (spouse): 30K
Type of employment:
Civil Servant (me)
Semi State (spouse). Both permanent positions.

SAVINGS
Savings 9all joint savings):
Local Credit Union: 30k
EBS: 10K
Child A (age 10): 10k
Child B (age 8): 8K
Other income: Monthly Child Benefit - 280euro

OUTGOINGS:
Credit card - paid in full each month.

PROPERTY:
Properties:
1 x house (we live in it)
Value of house: 150K
Left on Mortgage: 48K. We pay 450 euro per month.
Pension: I am going to get 23K lump sum at age 65. pro rata though, as I work 4 days. I will get 72euor per week on top of state pension too, as I did not start paying pension until age 30+.
I'm not sure about my husbands pension, he only started paying into a couple of years ago, it is an occupational pension. He should qualify for Full State Pension too.
Life Insurance: Whatever comes with mortgage - standard I presume.

Query:
We would like to buy an apartment for circa 70-85 in my Spouse's hometown. We don't know what to do. Should we pay off our house mortgage and then buy separately, or have two smaller mortgages, or can we afford it at all. Many thanks.
 
The first question is what rate are you paying on your home mortgage.

If you used €40 deposit on the apartment and borrowed €40k, the repayments would be in the region of €220 per month, can you afford that. Do you expect an income from the apartment. ?
 
Hello,
Thanks for your reply. The interest rate is 3.70%. Yes, we could afford 220 per month. No, we want to keep the apartment for our own use only.
 
I am not fully up to speed on mortgages, but I have no doubt that you could get a better rate on your current mortgage.

I would look for a second mortgage on the apartment, you should not have much trouble getting a mortgage on the figures you have quoted. I would not pay off the existing mortgage first. Once you have bought the apartment you might want to look at paying down

the mortgage.
 
You have €58k in savings, so if you buy an apartment for €85k, you will have to borrow about €30k.

Even if you do the calculations and find that you can afford to repay the new mortgage of €30k and the existing mortgage of €48k, the question is whether you should do it at age 45 with about 20 years left to work.

Owning an apartment comes with management charges and other expenses.

You may well need cash for your children's education in 8 years. You do not want to be burdened with mortgage repayments.

When you retire, you won't find the lump sum of €23k that great.

It would seem to me that you would be far better off using the €49k in savings, or most of it to clear your existing mortgage.

It's crazy to be paying 3.7% interest while you have money on deposit at 0%. That is costing you €1,800 a year! (€49k @3.7%)

If you clear your current mortgage, you will have an extra €450 a month to build up savings. So when your kids are ready for college, you will have a fund of about €40,000 and no mortgage. That would be a very comfortable position to be in rather than to have big monthly commitments on two homes.

Brendan
 
Agree with the above.

Might just throw this out there and open to correction if I'm wrong. As non-ftb you would need 20-30% (if not your main residence) of the price as a deposit. While you have it my concern would be are the sums your looking for too small too get a mortgage. Most banks have a minimum amount they are willing to give out. Otherwise you're looking at non-mortgage rates.
 
skrooge said:
Might just throw this out there and open to correction of in wrong. As non-ftb you would need 20-30% (if not your main residence) of the price as a deposit.
Click to expand...
Correct. Because it's not a primary residence, you'd actually need to get a BTL mortgage. So, higher deposit, higher interest rates. I'm pretty sure it was discussed previously in the context of holiday homes.

As well as the mortgage affordability, there are a lot of costs in running a 2nd home to factor in; insurance, utilities, maintenance, etc.
 
@TheBeach

Does your husband's home town have hotels? For 85k you could stay in a hotel for a month a year for 30 years.



Sorry for being glib. My parents have had a holiday home for 20 years and it's an utter money pit even with no mortgage: repairs, utilities, LPT, insurance. They spend enough for ten days' holiday stay in somewhere far nicer every year.
 
You must log in or register to reply here.
Back
Top